HSBC - Actions to Capture Value from our Global Presence ... · the most attractive global growth opportunities Unrivalled global presence Access to c.90% of global trade and capital

9th June 2015

HSBC – Actions to Capture Value from our Global Presence in a Changed WorldInvestor Update 2015

2

Important notice and forward-looking statementsInvestor Update 2015

Important noticeThe information set out in this presentation and subsequent discussion does not constitute a public offer for the purposes of any applicable law or anoffer to sell or solicitation of any offer to purchase any securities or other financial instruments or any recommendation in respect of such securities orinstruments.

Forward-looking statementsThis presentation and subsequent discussion may contain projections, estimates, forecasts, targets, opinions, prospects, results, returns and forward-looking statements with respect to the financial condition, results of operations, capital position and business of the Group (together, “forward-lookingstatements”). Forward-looking statements may be identified by the use of terms such as “believes,” “expects,” “estimate,” “may,” “intends,” “plan,”“will,” “should,” “potential,” “reasonably possible” or “anticipates” or the negative thereof or similar expressions, or by discussions of strategy. Anysuch forward-looking statements are not a reliable indicator of future performance, as they may involve significant assumptions and subjectivejudgements which may or may not prove to be correct and involve known and unknown risks, uncertainties, contingencies and other importantfactors, many of which are outside the control of the Group. There can be no assurance that any of the matters set out in forward-looking statementsare attainable, will actually occur or will be realised or are complete or accurate. Certain of the definitions, assumptions and judgements upon whichforward-looking statements contained herein are based are discussed under "Projections: Basis of Preparation" within the presentation "InvestorUpdate 2015 - Glossary and Basis of preparation", available at www.hsbc.com . A variety of additional risks and uncertainties that could cause actualresults to differ materially from those expected or anticipated, including those that are described in the Group’s Annual Report on Form 20-F for theyear ended 31 December 2014 filed with the US Securities and Exchange Commission and other reports and filings of the Group, including under theheadings ‘Top and Emerging Risks’ and ‘Risk Factors’ and in Note 40 (Legal Proceedings and Regulatory Matters) and other notes on the 2014Financial Statements included therein. Any such forward-looking statements are based on the beliefs, expectations and opinions of the Group at thedate the statements are made, and the Group does not assume, and hereby disclaims, any obligation or duty to update them if circumstances ormanagement’s beliefs, expectations or opinions should change. For these reasons, recipients should not place reliance on, and are cautioned aboutrelying on, any forward-looking statements. Moreover, past performance cannot be relied on as a guide to future performance. Nothing in thispresentation or in the subsequent discussions should be considered as a profit forecast.

Non-GAAP Financial InformationThis presentation contains non-GAAP financial information. The primary non-GAAP financial measure we use is ‘adjusted performance’ which iscomputed by adjusting reported results for the year-on-year effects of foreign currency translation differences and significant items which distort year-on-year comparisons. Significant items are those items which management and investors would ordinarily identify and consider separately whenassessing performance in order to better understand the underlying trends in the business. Reconciliation of non-GAAP financial measurements tothe most directly comparable measures under GAAP is provided in the ‘reconciliations of non-GAAP financial measures’ supplement available atwww.hsbc.com.

3

Actions to capture value from our global presence in a changed worldInvestor Update 2015

1. 2014 proforma basis ex Associates; excluding business growth

The actionsTargetedoutcome by 2017

10 Review location of Holding Company; complete review by year end 2015 Completed review by year end 2015

4

Deliver USD4.5-5.0bn cost savings

1 Reduce Group RWA by c.USD290bn (at least 25% of 2014 RWA)1

- Resize GB&M by c.USD140bn RWA, focus on strategically important and profitable businesses; represent less than 1/3rd of Group RWA

- US CML legacy run-off c.USD40bn- Other management actions / Brazil and Turkey c.USD110bn

5

Set up UK ring-fenced bank headquartered in Birmingham

GB&M return to Group target profitability; <1/3 of Group RWA

2017 exit rate = 2014 operating expenses

Completed by 2018

Re-

size

and

sim

plify

2 Continue to optimise global network and reduce complexity through the ongoing application of the 6 filter process. Sell operations in Turkey and Brazil; plan to maintain presence in Brazil to serve large corporate clients with respect to their international needs

Reduced footprint

US PBT c.USD2bnMEX PBT c.USD0.6bn

Rebuild profitability in Mexico and leverage the NAFTA strategic opportunity; leverage our international network and execute on key initiatives to deliver satisfactory returns in the US

3

Group RWA reduction USD290bn

9 Complete implementation of Global Standards; realise Global Standards as competitive advantage and driver of increased quality of earnings / reduced future fines

7 Pivot to Asia – prioritise and accelerate investments- Develop businesses at scale in Pearl River Delta and ASEAN- Accelerate the pivot of Insurance and Asset Management towards Asia- Set up digital centre in Pearl River Delta to drive innovation

8 Grow business from RMB internationalisation and extend global leadership position USD2-2.5bn revenue

6 Deliver revenue growth above GDP from international network- Increase contribution of international network (transaction banking products, strategic corridors)- Strengthen synergies across Global Businesses

Revenue growth of international network above GDP

Completed

Re-

depl

oy c

apita

l and

inve

st

c.10% growth p.a. AuM in Asia

Market share gains

4

Actions to capture value from our global presence in a changed worldInvestor Update 2015

* Includes time for presentation and Q&A

SpeakerPresentation Time

Overview of the Group Stuart Gulliver 08:00 – 08:30

Q&A 09:45 – 10:45

Summary and shape of the Group Stuart Gulliver 09:40 – 09:45

11:15 – 12:00*

12:00 – 12:45*

12:45 – 13:30*

Samir Assaf

Pat Burke

Peter Wong

Global Banking and Markets

US and NAFTA

Asia, China and the Pearl River Delta

Break

Strategic actions for the Group

Cost management

Financial targets

Stuart Gulliver

Andy Maguire

Iain Mackay

08:30 – 09:00

09:00 – 09:25

09:25 – 09:40

Strategic actions

5

AgendaInvestor Update 2015

Strategic actions2

1 Overview of the Group

Summary and Shape of the Group3

6

From“The World’s Local Bank”

87 countries / territories 73 countries / territories

15 full country exits and 10 line of business exits since 2011

Footprint

Weighted to developed economies (56% of adjusted revenue1; 60% of adjusted RWAs2 in 2010)

Re-balanced business to Asia (from 29% of Group adjusted revenue1 in 2010 to 36% in 2014; adjusted RWAs2

from 29% to 40%)

Business Mix

Growth primarily through acquisition

Compensated sold / lost revenues through organic business growthGrowth

Geography-led structure High degree of localisation

Consistent Global Business and operating modelOrgani-

sation

Narrow leadership team Team of 250+ Group General Managers and Talent Pool

External talentLeadership

Over-reliant on local capabilities

3.2k Compliance staff

De-risked business model Global three lines of defence 7.2k Compliance staff (1Q15)

Risk and Compliance

Material transformation since 2011Overview of the Group

Source: HSBC Holdings plc Annual Reports1. Revenue by geographical region include intra-HSBC items; this revenue has not been eliminated when calculating the above percentages2. RWAs are non-additive across geographic regions due to market risk diversification

Refocus

Six filters framework

78 disposals / exits

Legacy run-down

Simplify

Global management structure

8x8 organisation de-layering

FTE reduction of 13%

Protect

Global Standards

Conduct agenda

Strengthened culture

To“Leading International Bank”Transformation since 2011

7

ROE growth offset by decline from disposals, capital increase and fines for historical transgressions

Overview of the Group

1. Group effective tax rate used to calculate post tax amounts where applicable2. Net operating income on adjusted basis, less loan impairment charges and other credit risk provisions 3. Excludes repositioning and financial crime de-risking4. Sustainable savings

7.3

0.9

2.8

5.1

9.5

2014

Other7

Bank Levy (0.5)

Increased CET1build (2.2)

Legal, regulatoryand other charges6 (1.9)

Regulatory andCompliance costs (1.0)

Disposals andderisking (2.3)

Cost growthex sig. items5 (3.2)

Cost efficiency4

Risk adjustedrevenue growth2,3

2010 11.7%

8.5%

% ROTE

Customer redress

Legal proceedings and regulatory matters

UK customer redress programmes (e.g. PPI)

US CRS-related provisions

Consumer Credit Act provisions

Anti-money laundering and sanctions laws

Madoff-related

FHFA Settlement

FX-related

Regulatory investigations in GPB

US Mortgage foreclosure and servicing

0.7

4.8

11.2

P&L impact 2011-14USDbn

Items

2011-2014 average impact on ROE c.1.4%1

5.7

5. Excludes fines and redress (see footnote 6)6. UK Customer redress programmes, charge in relation to the settlement agreement with the Federal Housing Finance

Authority, Regulatory provisions in GPB, Settlements and provisions in connection with foreign exchange investigations7. Other includes Significant items other than fines, provisions and redress (see footnote 6), impact from Associates

ROE 2010-141

%

Legal, regulatory and other charges, 2011-14

8

HSBC: Unrivalled global presence, strong capital generation and progressive dividends

Overview of the Group

1. On an adjusted basis in 2014. Revenue by geographic region includes intra-HSBC items; this revenue has been not eliminated when calculating the above percentages2. PBT volatility 2004-14, HSBC vs. standard set of 5 global and 5 regional banks

c.40% of client revenues linked to international network

Ability to participate in the most attractive global growth opportunities

Unrivalled global presence

Access to c.90% of global trade and capital flows

Banking operations in highest growth geographies, particularly Asia (c.36% of Group revenues1)

Leading product capabilities to support global flows

1

Low volatility

Stable funding and liquidity

Diversified, universal banking model

Balanced universal banking model Low risk business model, resulting in

lowest earnings volatility vs. peers2

Resilient business model; profitable throughout the crisis

Multiple point of entry (MPE) structure

2

Progressive dividends

Ability to meet capital requirements

Strong intrinsic capital generation Average capital accumulation between

2011-14 of USD9.1bn Long-term progressive dividend;

industry leading

Strong capital generation with industry leading dividends

3

Our Purpose

Our purpose is to be where the growth is, connecting customers to opportunities, enabling businesses to thrive and economies to prosper, and ultimately helping people to fulfil their hopes and realise their ambitions.

Our Strategy

International network connecting faster growing and developed markets

Develop Wealth and invest in Retail only in markets where we can achieve profitable scale

Distinct advantages Benefits

9

World increasingly connected, with trade centre shifting to AsiaUnrivalled global presence

1995 2013

% world exports

100% = USD6.7tn1 100% = USD18.9tn >USD300bn>USD200bn>USD100bn

HSBC other marketsHSBC Priority markets

European and North American share of world exports

Asian ex Japan, Latin American and MENA share of world exports

Number of export corridors USD300bn+

Number of export corridors USD200-300bn

Number of export corridors USD100-200bn

63%26%

116

52%42%

44

15

HSBC is present at both ends of all USD100bn+ corridors

2

13

8

4

39

430

Export corridors between countries

4

1

17

3

47

920

Source: UNCTAD1. 1995 export figures are adjusted for inflation and to constant currency (2013 USD basis) using export deflator (Source: Oxford Economics) and Nominal Broad Dollar Index (Source: Federal Reserve)

10

Unrivalled network to support global trade and capital flowsUnrivalled global presence

1. Trade is measured as total 2014 merchandise exports (Source: Global Insights, March 2015). FDI is measured as 2013 FDI outflows (Source: UNCTAD)

2. Constant currency (2010 USD basis). Source: Oxford Economics

European Economic Area5

Trans-Pacific Partnership

Greater China3

ASEAN

MENA4

3.5%

4.4%

4.5%

5.5%

5.7%

6.2% 5.8

2.6

2.8

5.0

11.1

of global trade in 2025

HSBC Priority markets on both sides HSBC Priority market on one side

China – Hong Kong China – US Australia – China

Japan – US Japan – Canada US – Singapore

US – Mexico US – Canada

Malaysia – Singapore Singapore – Indonesia Malaysia – Indonesia

Saudi Arabia – UAE Saudi Arabia – Egypt Egypt – UAE

88%

NAFTA

8.8

Germany – France Germany – UK

4.5% aggregate CAGR

3. Export figures exclude Macau4. Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, Yemen5. Export figures exclude Liechtenstein

Trade

18.7

60%

31%

9%

HSBC Priority markets

Rest of HSBCnetwork

Rest of world

FDI

1.4

56%

40%

4%

USDtrn

Of which Brazil, Turkey constitute c.2% Trade <1% FDI

Coverage of global flows1 Major trade and economic zones2

Exports growth CAGR 2014-25, %Key corridorsExports

2025, USDtrn

11

Leading position in highest growth markets

Source: HSBC Annual Report (2014), Global Insights, March 20151. Real GDP absolute growth, reported in constant currency (2010 USD basis). Source: Global Insights, March

20152. US, Canada and Mexico

3. GDP growth figure includes Sub-Saharan African countries4. Latin America excluding Mexico5. Non-financial institutions


14.9

1.8

2.7

4.9

6.4

9%

4%

34%

16%

37%Asia

Europe

Other Latin America4

Middle East and North Africa3

NAFTA2

GDP growth 2014-20251, USDtrn

HSBC reported revenue% of total

Market positionHSBC reported PBT% of total

1%

10%

3%

8%

78%

Best Bank in Asia Best Bond House RMB House of the Year

Best Debt House and Best Risk Adviser in Western Europe

Best Export Finance Arranger and Best Trade Advisor in EMEA

Best Investment Bank in the Middle East

#1 in Equity Capital Markets Best Trade Finance Bank in MENA

Best Transaction Services House Best Bond and Loan House Derivatives House of the Year

Best Export Finance Arranger in North America

Best Trade Finance provider – Canada Best Domestic Cash Manager5 – Mexico

12

Benefits of international network vs. the costs of running a global bankUnrivalled global presence

1. International client revenue as defined on subsequent page

Revenues for international network

Cost of capital and funding

Operating expenses

G-SIB and TLAC requirements increase capital and funding needs (however somewhat offset by D-SIB)

Benefits from global scale in support functions and IT –e.g. offshoring, operational hubs, global systems, etc.

Procurement scale

Cost of complexity; negatively impacted by increasing costs of running a global bank – e.g. global regulatory programmes

Bank levy calculated on global balance sheet

+

–

–

+

–

Client revenue linked to international network represents c.40% of HSBC client revenue and is a driver of growth (c.USD22bn1 in 2014)

Unique differentiator for clients, proposition that is hard to replicate+

+

Drivers of value Contribution

Ability to invest through regional macroeconomic cycles and move capital and resources to highest growth opportunities; more resilient in downturn or crisis

Lowest earnings volatility vs. industry 2004-14

+

+

Diversification benefit

Material positive contribution

Lowest volatility vs. peers

Scale benefits offsetting costs of running a global bank

Negative, however somewhat offset by D-SIB requirements

Small positive contribution Lower funding costs and capital due to Group structure+

Value of international client revenues lost would be greater than capital freed up– Long-term competitive advantage of HSBC as leading international bank –

13

c.40% of client revenue is linked to HSBC’s international network; driver of growth


Source: Internal HSBC client data1. HSBC 2014 reported revenue, excluding Other Global Business, BSM, US CML Run-off, GB&M Legacy Credit and Principal

Investments2. Includes in-country revenue (in country where relationship is managed) and cross-border revenue3. CMB Large Corporate and MME clients operating in one market and / or generating GTRF and FX revenue in excess of USD10k

International

Domestic

USDbn

RBWM domestic

0

CMB – internationalclients and majorinternational products

GB&M domestic

RBWM international

GB&M - largeinternational clients

GPB international

CMB domestic -BB/MME

GPB domestic

10 15 255 20

c.40%

c.60%

+

‒

Client revenue, 20141Growth2013-14

Corporate clients served in more than one market2

Clients with significant international product revenue3

International clients4

International Premier5 clients and asset management clients6

Domestic clients7

Domestic clients served in one market7

Domestic retail clients7

Domestic clients7

Definition

3. Clients from which revenue is booked in a different location to domicile4. Premier clients served in more than one market and wealth qualifying (investable assets in excess of USD50k)5. Includes external wholesale and institutional distribution, as well as sales to international corporate clients6. Client revenue excluding revenue defined as International

14

International network enables strong market position in products supporting global trade and capital flows


1. Adjusted basis2. Revenue includes CMB current accounts and savings deposits; Market share: SWIFT3. Market share of Traditional Trade Finance (includes shadow income from foreign exchange and revenue from associates): Oliver Wyman analysis / estimates 4. Market share by volume: Euromoney Global FX Survey5. Market share based on HSBC’s share of AUC and AuM of the top 8 Securities Services players

Transaction banking products

10.7%8.0%

13.1%11.1%

5.4%6.7%

5.1%

2014

5.3%

2011

Products HSBC’s market position

Payments & Cash Management2

Global Trade & Receivables Finance3

Foreign Exchange4

Securities Services5

Market share

Revenue1

2014, USDbn

1.7

3.6

3.4

6.8

CMBGB&M Best Global Cash

Management Bank for Corporates and Financial Institutions

#1 Global Market Share –Non-Financial Corporates

Best Bank for Emerging Asian Currencies

Custodian of the Year – UK & Ireland 2nd year running

Mutual Fund Administrator of the Year

Best Trustee Award

Best Global Trade Finance Bank

Best Supply-Chain Finance Bank

Key awards

2014

USD16bn transaction banking revenue

15

Breadth and scale of footprint unique HSBC proposition – deeper relationships and higher revenue per client


Source: Internal HSBC client data1. Priority clients; c.30% of GB&M clients representing more than 80% of 2014 GB&M client revenue. Defined by HSBC as clients with strong existing relationship or solid growth prospects2. Country where client relationship is managed3. Where annual revenue per booking country is >USD200k

Europeanclients

Asian clients

North Americanclients

Latin Americanclients

By domicile2

Banked in more than

10 countries

8.0x

Banked in 3-10 countries

2.4x

Banked in fewer than 3 countries

1.0x

Average revenue per client

Indexed to average revenue from clients banked in less than 3 countries3

0 200 400 600

93%

71%

93%

69%

78% 60%

51%

79%

45%

MENAclients 72%

18%

18%

14%

26%

21%

Served in 1 regionServed in 2 or more regions

5 9 12

c.35% c.65% c.80%

Number of clients

GB&M clients1, 2014

% clients served in 3 or more regions

% clients served in 2 regions

Average number of products

Share of revenue booked outside domicile2

# of clients

16

Example: Capabilities enabled through international network –CK Hutchison Holdings Limited


1. Awarded by FinanceAsia to Hutchison Whampoa Limited

One of the largest companies listed on the main board of The Hong Kong Stock Exchange

Awarded Asia’s Best Conglomerate in 2014 and 20151

Turnover USD35bn

Business in over 50 countries

Long established banking relationship with HSBC

HQ, Hong Kong

“Li Ka-shing scraps Watsons IPO as Temasek buys USD6bn stake”

Financial Times March 2014 HSBC adviser 25% stake of AS Watson to

Singapore’s Temasek for HKD44bn

“Hutchison Whampoa agrees to buy O2 for GBP10.3bn from Telefónica”

Financial Times March 2015 HSBC adviser / bookrunner /

facility agent / underwriter HWL largest overseas deal O2 and Three mobile group will

bring together 41% ofUK wireless market

“Li Ka-shing overhauls business empire”

Financial Times January 2015 HSBC sole financial adviser on

USD26bn corporate restructuring

Reorganisation and combination of HWL andCheung Kong

32Countries

with bankingrelationships

17Countries with GTRF business

30Countries with PCMbusiness

CK Hutchison Global footprint

Client profile

17

Diversified universal banking model with strong funding and low risk profile

Diversified universal banking model

Key businesses and products

Credit and lending Trade and receivables finance Payments and cash

management

Markets (e.g. FX, Credit and Equities)

Capital financing Securities services

Retail deposits and account services

Asset management Insurance

Private banking Investment management Wealth solutions

(e.g. alternative investments, trust and estate planning)

% of total

27%

4%

40%

29%

CMB

GB&M

RBWM

GPB

Reported revenue1

2014, USDbn

2.4

24.6

17.8

16.3

OtherNII NFIDiversified business mix

Loans and advances2 / Deposits

LICs / Loans and advances2

10 year PBT volatility5

73% 92%3

0.9%4

0.4%

0.9x2.5x

Low-risk model with low earnings volatility2014

Leverage ratio 4.8%

Peer group average7

4.4%6

HSBC

Source: Annual reports, FactSet, Bloomberg1. Excludes revenue recorded in Other and Intersegment of USD0.1bn; total Group revenue of USD61.2bn2. Represents gross loans and advances to customers. The loans and advances to deposits ratio on a net basis was 72% as

reported for HSBC3. Excluding Itau and Santander, peer average would be 81%

4. Excluding Itau and Santander, peer group average would be 0.53%5. Calculated as average of the PBT range divided by average PBT from 2004 to 2014 for each of the peers defined6. Source Bloomberg. Itau, ICBC and DBS not published7. Peer group average calculated using reported financials as reported for sample set of 5 global banks (JP Morgan, BNP Paribas,

Citigroup, Deutsche Bank, Standard Chartered) and 5 regional banks (DBS, Santander, Itau, ICBC and Barclays)

18

Revenue synergies of c.USD12bn enabled by universal banking modelDiversified universal banking model

GB&M clients

CMB clients

RBWM clients

In-businesssynergies4

2.8 Payments and Cash Management from CMB3

GTRF solutions from CMB Asset management products from RBWM

FX, derivatives, and capital financing from GB&M Investment and insurance from RBWM Asset Management products from RBWM

GB&M products for retail and business banking solutions

3.4

0.8

7.4

Securities services / custody (HSS) Asset management (manufacturing) Insurance (manufacturing)

GPB clients

Referrals from three other global businesses Global Markets products to private clients Insurance and Asset Management products from RBWM

0.4

Total cross-business synergies revenue

4.2

Total revenue synergies 11.6

Cost and funding synergies

Total revenue synergies by Global BusinessRevenue2 2014, USDbn

1. A portion of revenue synergies shown for 2014 were not tracked in 2010; for 2014, these items included USD1.3bn of cross-business collaboration revenues and USD1.4bn of in-business synergies for which an equivalent 2010 value is not available

2. Cross-business synergies are presented as gross revenue and do not reflect any revenue sharing arrangement between Global Businesses3. PCM is currently managed under CMB and GB&M. The GB&M portion is included as revenue synergy to provide a consistent treatment with GTRF4. In-business synergies include separately managed operations that are reported within a global business line

10% 19%% of total reported revenue

2014

11.6

6.0

2.8

2010

6.7

4.0

2.6

Cross-business synergiesIn-business synergiesNot tracked in 2010

7.4

4.2

Total revenue synergies1

2010-14, USDbn

19

1.012

0.5

19971995

8

199319910.0

20092007 20112001 200519990

4

20132003

Long-term history of progressive dividendStrong capital generation with industry leading dividends

Source: Annual Report and Accounts1. Dividends declared to ordinary shareholders2. Under the terms of the share capital reorganisation on 2 July 1999, each shareholder of HSBC Holdings plc received three new ordinary shares of USD0.50 for each existing

ordinary share of 75p or ordinary share of HKD10 held3. Rights issue in 2009 offered shareholders five ordinary shares for every twelve ordinary shares held

Dividends declaredDPS

3-to-1 share capital reorganisation2 (1999)

Dividends declared,USDbn

Dividends per ordinary share,USD

Dividends declared1 since 1991

Rights issue3 (2009)

20

Share price, dividends paid and total shareholder returnStrong capital generation with industry leading dividends

Source: Bloomberg1. Period from 01 January 2005 to 29 May 2015; dividends includes dividends declared on ordinary shares2. Includes set of 5 global banks (as elsewhere in presentation): Citi, JPMorgan Chase, Standard Chartered, BNP Paribas, Deutsche Bank3. Includes top-3 UK banks: RBS, Lloyds Banking Group, Barclays

(100)

(75)

(50)

(25)

0

25

50

75 UK banks3Global banks2HSBC

HSBC

Share priceDividends declared TSR

(66.5)

3.0

(18.7)

14.1

35.9

58.0

(52.4)

38.9

39.3

UK banks3

Global banks2

January 2005 May 20152007 2009 2011 2013

Total shareholder return

10 year performance2005-151, %

21

Agenda

Strategic actions2



Investor Update 2015


Cost management

Financial targets

22

Adapting to a changed worldStrategic actions for the Group

Increasing global connectivity Deepening of capital markets and

expansion of wealth pools in developing markets

Expanding importance of China (“China going out”) and rise of the RMB

Retreating banks in the West Emerging market banks maturing into

regional competitors Only 1-2 banks still able to facilitate

global trade / capital flows

Shifting economic powers

Regulatory changes

Competitive landscape

Greater capital and funding requirements

Conduct and Compliance focus Increasing local regulation, ring-

fencing, subsidiarisation

Technology / Innovation

Exponential digital / mobile adoption Technology firms entering financial

services sector Increasing opportunities and risks in

data

23

Actions to capture value from our global presence in a changed worldStrategic actions for the Group

1. 2014 proforma basis ex Associates; excluding business growth

The actionsTargetedoutcome by 2017

10 Review location of Holding Company; complete review by year end 2015 Completed review by year end 2015

4

Deliver USD4.5-5.0bn cost savings

1 Reduce Group RWA by c.USD290bn (at least 25% of 2014 RWA)1

- Resize GB&M by c.USD140bn RWA, focus on strategically important and profitable businesses; represent less than 1/3rd of Group RWA

- US CML legacy run-off c.USD40bn- Other management actions / Brazil and Turkey c.USD110bn

5

Set up UK ring-fenced bank headquartered in Birmingham

2017 exit rate = 2014 operating expenses

Completed by 2018

Re-

size

and

sim

plify

2 Continue to optimise global network and reduce complexity through the ongoing application of the 6 filter process. Sell operations in Turkey and Brazil; plan to maintain presence in Brazil to serve large corporate clients with respect to their international needs

Reduced footprint

US PBT c.USD2bnMEX PBT c.USD0.6bn

Rebuild profitability in Mexico and leverage the NAFTA strategic opportunity; leverage our international network and execute on key initiatives to deliver satisfactory returns in the US

3

Group RWA reduction USD290bn

9 Complete implementation of Global Standards; realise Global Standards as competitive advantage and driver of increased quality of earnings / reduced future fines

7 Pivot to Asia – prioritise and accelerate investments- Develop businesses at scale in Pearl River Delta and ASEAN- Accelerate the pivot of Insurance and Asset Management towards Asia- Set up digital centre in Pearl River Delta to drive innovation

8 Grow business from RMB internationalisation and extend global leadership position USD2-2.5bn revenue

6 Deliver revenue growth above GDP from international network- Increase contribution of international network (transaction banking products, strategic corridors)- Strengthen synergies across Global Businesses

Revenue growth of international network above GDP

Completed

Re-

depl

oy c

apita

l and

inve

st

c.10% growth p.a. AuM in Asia

Market share gains

GB&M return to Group target profitability; <1/3 of Group RWA

24

Overview of Group RWAStrategic actions for the Group: Reduce Group RWA

1. Excludes US CML run-off, GB&M Legacy Credit, BSM and Associates2. Includes SABB, BoCom and other Associates 3. Adjusted RoRWA calculated using adjusted pre-tax return and reported average RWA, at constant currency and adjusted for effects of significant items

1

Adjusted RoRWA3

2014, %

1.9%

1.6%

1.0%

Adjusted RoRWA3

2014, %2014 RWA USDbn

GPBex Associates

415

RBWMPrincipal, ex Associates

330CMBex Associates

131

GB&MClient facingand Legacy

20

44371

3.4

4.8

2.3

1.2

161 174155 160

50

Associates2

US CML run-offportfolio

BSM

GB&M legacy credit portfolio

Global businessactivity1

2014

1,220

55

7044

891

2013

1,093

79

6326

770

2012

1,124

107

4839

756

2011

1,210

132

41

826

1.9%

Breakdown by Global BusinessGroup RWA2011-14, year-end, USDbn

0.4%3.7%

1.4% excl. Legacy

Legacy credit

Client facing

25

At least 25% reduction in Group RWA; over 2/3 of capacity to be refocused on growth opportunities, particularly in Asia

Strategic actions for the Group: Reduce Group RWA

1

1. RWA from Associates excluded – 2014: USD160bn, 2017: USD180bn

RWA excl. Associates1 by Global Business

c.110

GB&Mmgmt.actions

c.140

2014 FX adjusted

ex-Associates1

c.1,045

Associates and

currency trans-lation

c.175

2014reported

1,220

c.755

>25%

End 2017ex-

Associates1

Impact ofpotential

regulatory changes

Business growth

and other

180-230

2014 proforma

ex-Associates1

US CML run-off

c.40

Brazil, Turkey and

other management

actions

Includes:– Brazil / Turkey:

c.USD70bn – CMB: c.USD30bn– Other management

actions: c.USD10bn

Redeployed to support high performing transaction banking products and Asia

Group RWA USDbn, year-end

7%

RBWM

GPB

CMB

GB&M(ex BSM)

BSMOther

2017 target

100%

<1/3

2014 Reported

100%

18%

2%

31%

39%

3%

26

GB&M: Distinctive characteristics of client facing businessStrategic actions for the Group: Reduce Group RWA

1

1. Includes Intra-HSBC items (c.USD217bn), Legacy Credit (USD46bn) and derivatives netting (USD313bn) 2. Includes Principal Investments and Other

729

1,840

2014 Client

facing net assets

Legacy Credit

& Other1

(576)

Associates

(3)

BSM

(532)

2014Reported

516 70 31 44 371Reported RWA, USDbn

c.40% of assets and c.70% of RWA

Other2

PCM, HSSand GTRF

Capital Financing

Markets (excl.Legacy Credit)

2014

15.1

2013

15.3

2012

13.5

2011

12.7

Client facing adjusted revenue

c.55% of revenue with low volatility

Client-centric, diversified model with low volatility revenue

Largely driven by businesses where GB&M has a Top 5 rank

Outside top 5/unknown rank

Top 5Top 32014

2014 client facing adjusted revenue by market rank

USDbn

USDbn c.70% of adjusted revenue

Client facing assets and RWA Distinctive characteristics of GB&M

27

Restoring returns in GB&M c.USD140bn RWA reductionStrategic actions for the Group: Reduce Group RWA

1

2017 GB&M client facingand Legacy 2.5%

Net revenue growth / other1

Cost saves

Cost increase – Inflationand investments

Net RWA reduction

2014 GB&M client facing and Legacy 1.2%

Group 2.3% RoRWA= 10% ROE

44LegacyCredit

Clientfacing

2017 target

285

GrowthBrazil and Turkey

Management actions

140

GB&M client facing and Legacy

415

371

Plan to resize GB&M by c.USD140bn RWA

RWA, USDbn

Accelerated portfolio run-down

Legacy credit active sell-down Long-dated Rates Low returning loan portfolios

Other Markets Adoption of advanced modelling

Capital Financing and GTRF

Shift towards “originate and distribute” model

Exit / optimise low returning clients

Key actions

RoRWA target – restore returns

GB&M client facing business to represent <1/3 of Group RWA

1. Includes impact of revenue foregone as result of RWA reductions; Other includes Loan impairment charges

1.4% excl. Legacy

28

Six filter framework applied to review country footprint; scale additional consideration for review

Strategic actions for the Group: Optimise global network

Note: Financials exclude Associates and legacy portfolios (c.USD260bn of RWA)1. Top 50 economy by GDP in 2050; relevant domestic market share2. Markets with high external connectivity (Top 50 Trade, Top 50 FDI) and high share of revenues from international connectivity3. ROE for countries calculated using adjusted RoRWA and assuming CET1 ratio of 12-13%; 10% ROE equivalent to 2.3% RoRWA

2

Strategic relevance

Scale priority markets1 For review

Brazil Turkey

Review

Review

Australia Canada Egypt India Taiwan

China - Pearl River Delta Hong Kong Malaysia Saudi Arabia Singapore UAE UK

Improve returns and gain scale

Improve returns and grow in key cities

0%10%52%

8%

Mexico Investment case Germany Mainland China

Optimisation France Indonesia Switzerland (GPB) US

Grow Grow in focus areas

Dilutive to Group target: <10% ROE3

6 Filters3. Profitability

4. Efficiency5. Liquidity

1. Connectivity2. Economic

development

6. Financial crime risk

6 Filters

6 Filters

Includes countries: With limited connectivity With material presence but challenge to reach scale That do not fulfil HSBC’s risk / transparency

requirements

International connectivity markets2 (cities-led)

3% 27%

Share of priority markets RWA,ex Associates

Priority markets

Accretive to Group target: >10% ROE3

29

50-60 countries of HSBC’s network required to provide international connectivity

Strategic actions for the Group: Optimise global network

Source: Global Insights, March 20151. Pearl River Delta not included in total number of countries2. Exports and Imports3. Inbound and outbound capital flows

2

4. Revenue by geographical region includes intra-HSBC items, this revenue has not been eliminated in calculating the above percentages

5. Inbound / outbound revenue associated with serving international clients; Source: Internal HSBC client data

Number of countries1

Market coverage

HSBC Revenues

Share of global GDP

Share of global trade flows2

Share of global capital flows3

Share of reported revenue4

Share of inbound / outbound revenue5

18

Priority countries

61%

58%

54%

84%

79%

15

Remaining countries

1%

1%

1%

2%

1%

20

Next 20 largest trade countries

24%

27%

26%

2%

11%

>120

Countries not covered by HSBC

7%

9%

6%

n / a

n / a

20

Next 21-40 largest trade countries

8%

5%

12%

12%

9%

HSBC footprint

30

Turkey 169

Brazil 225

India 324

UAE 373

Mexico 398

Singapore 437

UK 481

Hong Kong 526

France 583

Germany 1,491

US 1,629

China 2,353

Brazil and TurkeyStrategic actions for the Group: Optimise global network

1. Exports; Source: Global Insights, March 20152. Banco Central Do Brasil, data as of December 2014, reported in USD3. Turkish Bank Association, data as of December 2014, reported in USD

2

Trade1, 2014Exports as% of GDP, 2014

6.3x

Citibank 23

BancoVotorantim 37

Banco Safra 53

BTG Pactual 58

HSBC 63

BancoSantander 225

BancoBradesco 333

Caixa Eco. Federal 401

Itau Unibanco 421

Banco do Brasil 499#1

#2

#3

#4

#5

#6

#7

#8

#9

#10

106

6.5x

HSBC 15

ING 16

TEB Fortis 27

Deniz Bank 30

Finans Bank 32

Halk Bank 67

Vakif Bank 68

YKB 78

Akbank 88

Garanti 94

Isbank 102

Ziraat#1

#2

#3

#4

#5

#6

#7

#8

#9

#10

#11

#12

23%

9%

39%

20%

182%

16%

142%

31%

90%

16%

10%

21%

Brazil, Assets2

USDbnTurkey, Assets3

USDbnUSDbn

31

Mexico: Relevant local position in open economy; NAFTA opportunity

Strategic actions for the Group: Turnaround US and Mexico

1. Exports; Source: Global Insights, March 20152. Source: CNBV (National Banking and Securities Commission); Deposits: peso core deposits as of December 20143. Trade market share includes import, export, and stand-by letters of credit for FY2014. Source: International Chamber of Commerce4. Source: Dealogic, 2014FY

335

141417

22

9

1.5x

Banco del Bajio

InbursaScotiabankHSBCSantanderBanorteBanamexBBVA Bancomer

1,830 1,539 1,269 1,209 984 586 341 288

9161620233990

142182

31

USIndiaUKFranceChinaMexicoGermanyUAESingaporeHong Kong

# Branches2

Rank by 2014 exports1

#5 #1 #2#8 #4#3#9#7 #6 #10

Strong wholesale position Trade3: 16.3% share DCM4: 12.6% share ECM4: 10.5% share

3

Very open economy; top 10 exporter

HSBC top 5 bank in Mexico2014 deposits2 market share, %

Exports1 as % of GDP of top 10 markets by exports, 2014

RoRWA target

2.0-2.2%2017 target

RWA increase to support growth

Cost reduction

Cost increase -Investments regulatoryand inflation

Revenue growth

2014 adjusted 0.3%

Continue to implement and embed Global Standards

PBT c.USD0.6bn

Simplify operations and streamline IT

Savings to offset cost growth

Increase retail productivity

Capture NAFTA and Energy opportunities

PBT c.USD0.1bn

11 structural reforms (including energy reform) toboost economic growth in Mexico

32

US: Strong linkages to global trade and payments; significant contribution to Group’s outbound revenue

Strategic actions for the Group: Turnaround US and Mexico

Source: Oxford Economics1. Total merchandise export flow for priority markets (excl. Switzerland, Taiwan)2. Excludes Russia3. 2020 Exports / Imports, USDbn

US’s largest trading partners remain Canada, Mexico and mainland China

USA exports1 by key trade corridors 2014Value of exports, USDbn

% 2014-20 CAGR

Mainland China

India

Hong Kong

Indonesia

SingaporeAustralia

Malaysia

Trade1 with Asia

Asia

129.5 129.5

19.6

39.4

8.6

30.5 26.9

13.0

387.3

10%

11%

9%

8%

4%3%

6%

8%

Trade1 with Europe

FranceGermanyUK

33.6 50.5 53.3

2%3%3%

Europe2 328.2 4%

Trade1 with MEA

Saudi ArabiaUAE

Egypt

MEA

7%8%

8%8%

18.2 20.6

6.4

109.0

Presence in 4 of 5 largest trade corridors in 20203

7538718938951,065

China-HK US-MexicoUS-ChinaUS-CanadaUS-Japan

4. Source: SWIFTWatch5. Source: Dun and Bradstreet, April 2015 – Headquartered Companies, or are actively importing / exporting, with Global Sales over USD30m6. Excludes Netherlands with no outbound revenue data for HSBC

Trade1 with NAFTA

Canada 313.1 5%Mexico 241.3 6%

NAFTA 554.4 5%

Number of companies by headquarter location5,6, 000s

Corporate headquarters

% of total values, March 20154

Cross-border transaction currency

RMBJPYGBPEURUSD

45%

27%

8%3% 2%

1.81.82.93.63.7

11.6

CanadaItalyUKGermanyJapanUS

% of HSBC outbound revenue

21% 2% 6% 15% 3%2%

3

HSBC Priority markets

33

US: Turnaround by leveraging International / NAFTA networkStrategic actions for the Group: Turnaround US and Mexico

1. Defined by HSBC as clients with strong existing relationship or solid growth prospects2. Clearing House Interbank Payments System (CHIPS), April 2015; market share based on actual volumes3. Top 4 cities accounting for c.90% of HSBC US Retail branches4. International population estimated using percent of 2009-2013 lawful permanent resident permits granted to employment-based applicants by metropolitan area; Source: Homeland Security year book, 2009-2013

3

US franchise – strong fundamentals

48%41%

11%

% of US GB&M Core and Priority clients1

15.4%10.0% 9.7% 9.2%

17.4%

Market share, cross-border payments2

6%

69%

9% 7%

Share of HSBC branches, %



Banked in >10 countries

c.90% of GB&M clients banked in multiple countries

Top 5 cross-border USD clearer

Retail network aligned with international residents3

NYC Metro Los Angeles Miami San Francisco

c.22% of international residents in NYC Metro4

JP Morgan Citigroup Bank of America

HSBC BoNY

RoRWA target

US ex CML run-off (showing domestic returns only, not including returns generated outside US)

Recycle low yielding assets RWA data / modelling

refinements

0.4%

RBWM / GPB / Otherbusiness growth

1.5-1.7%

CMBbusiness growth

RWA reduction

Savings initiatives

GB&Mbusiness growth

2014 Adjusted

Investment for growth and operating expenses

2017 Target

Global Markets recovery Growth in transaction banking

products and Capital Financing Deliver on international

connectivity (global and NAFTA) Accelerate domestic and inbound

contribution

Recycling cost from back office to front office

Investment in platform for strategic growth

Execute retail turnaround via deposits, wealth and mortgage

34

Comparison UK with Rest of the Group

HSBC activities based in the UK – 4 distinct rolesStrategic actions for the Group: Ring-fenced bank

1. As at 31 December 2014 on a reported basis

2014 FTEUK based activities

Group headquarters

Holding Company Selected Global Business and

Global Functions roles

UK retail, private, and commercial business

UK domestic activities to be included in ring-fenced bank (RFB)

UK RBWM, CMB, GPB Re-location of retail / commercial

HQ to Birmingham

GB&M

Global and European GB&M hub European activities split between

UK, France and Germany Non ring-fenced bank (NRFB)

9%

GB&M

UK retail, private,and commercial

business

Rest ofGroup

Deposits

10%

22%

67%

Assets

30%

61%

UK

c.2k

c.26k

c.4k

4

Functions and operations

Operational activities supporting the UK domestic business

Other business and functional roles not part of Holding Company

UK Service Company “ServCo”

c.14k

20141

35

Set up c.USD11bn revenue Ring-Fenced Bank (RFB) in the UK; relocate to Birmingham

Strategic actions for the Group: Ring-fenced bank

Note: Note: Figures on this slide represent the 3 global businesses that are largely expected to be in the RFB. However, the RFB will contain revenue items outside of these businesses and these figures cannot be used to estimate the profitability of the RFB as a whole. The review around GPB UK and its component elements is on-going, with the above representing the latest thinking and is subject to change1. Adjusted basis; Adjusted for significant items namely provisions arising from the ongoing review of compliance with the Consumer Credit Act in the UK (USD632m), debit valuation adjustments on derivative contracts (charge of

USD203m ) and fair value movements on non-qualifying hedges (income of USD8m)2. To/from customers; As at 31 December 2014 on a reported basis

4

USD324bn

c. 46k USD439bn

USD 16.1bn

GPB3%CMB

25%

RBWM 40%

GBM32%

Holdings

5%

GB&M

9%

GPB

1%

CMB12%

RBWM44% Functions/Other30%

Business largely in RFB Business largely in NRFB

Other

6%

GPB

3%

CMB 26%

RBWM38%

GBM27%

Other

GPB3%CMB

25%

RBWM 43%

GBM29%

Holding Company

Ring-fenced bank

Non Ring-fenced bank

(Birmingham)

(Leeds)

(Chester)

(London)

(London)

Revenue1

2014

Loans and Advances2

2014

FTE2014

Deposits2

2014

Illustrative figures

Ring-fenced bank

36

Deliver USD4.5-5.0bn savings to exit 2017 at 2014 level; shift mix towards front office

Strategic actions for the Group: Cost management

1. Excluding impact of disposals and at constant FX rates2. Impact of change from 2014 reported FX rates to 1Q15 FX rates3. Bank levy estimates based on 2015 bank levy rates

0.1

5.8

4.7Total cost increase

Increase in Bank Levy, Regulatory and Compliance, Misc.

4.6

Net impact

Savings delivered/ planned (5.7)

Growth and inflation

USD4.5-5.0bn savings in 2014-17 to fund all inflation, growth and regulatory investmentsGroup target to maintain flat costs

0.0

0.6

(0.6)

(4.5-5.0)

3.9-4.4

Savings in 2011-14 funded most growth and investments

3.6

37.92.3

“Back Office”Run the bankGlobal Functions &HTS5

“Front Office”Run the bankGlobal Businesses5

Change the bank4

Bank Levy3

2017 exit run-rate

32.0

c.39%

c.48%

c.8%c.5%

2014 Proforma

32.0

46%

43%

8%3%

Brazil / Turkey and

FX adjustments

2014Adj1

Savings in 2014-17 tofund all inflation, growth and regulatory investments

2010-14 2014-17 target6USDbnUSDbn

Adjustment for exit marketsFX adjustment2

5

4. Change the bank costs defined in Appendix5. Run the bank costs defined in Appendix6. 2017 Exit rate

37

International network driver of growth supported by leading market position in transaction banking products

Strategic actions for the Group: Growth from international network

1. Constant currency (2010 USD basis). Source: Oxford Economics2. Market share of Traditional Trade Finance (includes shadow income from foreign exchange and revenue from associates): Oliver Wyman analysis / estimates. Awards: GTR Leaders in

Trade 2014; Trade Finance Awards for Excellence 20143. Market share: SWIFT. Award: Euromoney Cash Management Survey 20144. Market share by volume: Euromoney Global FX Survey. Awards: Euromoney Global FX Survey, FX Week Best Banks Awards5. Market share based on HSBC’s share of AUC and AuM of the top 8 Securities Services players. Awards: MPF Awards for Management Excellence, Custody Risk European Awards

HSBC priority markets’ export and real GDP annual growth1

Grow market share in key strategic corridors

6

GTRF2

2014 market share, %

5.4%

10.7%

13.1%

5.3%

2004 2006 2008 2010 2012 2014

2.0

1.5

1.0

0.0

Real GDPExport

4.7%

2.8%

CAGR, 2004-14Indexed to 2004

5.3%

2018

3.4

2017

5.4%

3.5

2016

5.6%

3.5

2015

4.4%3.3

5.2%

3.4%

CAGR, 2014-18Real GDP Export

Best Global Cash Management Bank for Corporates and Financial Institutions

Best Global Trade Finance Bank Best Supply-Chain Finance Bank

Extend strong position in transaction banking products

PCM3

FX4

HSS5

Key awards in 2014

Expand client coverage

Extend product offering and enhance capabilities

Grow Asia cross-border flows

Leverage presence in both legs of largest and fastest growing trade corridors

Improve coverage of client subsidiaries

#1 Global Market Share – Non-Financial Corporates

Best Bank for Emerging Asian Currencies

Custodian of the Year – UK & Ireland Mutual Fund Administrator of the Year Best Trustee Award

Faster growth in trade than GDP, 2004-141

38

Contribution of Asia continues to growStrategic actions for the Group: Investments in Asia

1. Change in accounting basis in 2005

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

100%

200%

10%

8%

Asia

Middle East and North Africa

Europe

North America

Latin America

2014 Adjusted

22.8

64%

17%

9%2%

2014Reported

18.7

78%

3%8%1%

2004Reported

18.9

33%

3%

30%

28%

6%

Latin AmericaNorth AmericaEurope

Middle East andNorth Africa

Asia

PBT by region

USDbn

Reported PBT 2004-14% change, indexed to 20041

7

39

Going forward, Asia key growth opportunity for the Group –pivot to Asia

Strategic actions for the Group: Investments in Asia

Source: HSBC Annual Report (2014),, Global Insights March 2015, McKinsey1. Real GDP absolute growth, reported in constant currency (2010 USD basis). Source: Global Insights, March 20152. Latin America excluding Mexico3. Includes commercial banking and retail banking revenue pool for HSBC Priority markets, source: McKinsey banking revenue pool

1.8

2.7

4.9

6.4

14.9Asia

Europe

Other Latin America2

Middle East / Africa

NAFTA

2014-20251

4.7

2.6

1.9

4.3

3.0

2010-20251, USDbn; % Strong economic

growth with overall low levels of public debt

Emerging middle class and accelerating wealth creation

Ageing populations with need for protection / pensions

Deepening of financial markets

Asian corporates going out – increasing number of cross-border transactions with Asian corporates buying abroad

Hong Kong-Pearl River Delta expected to be the largest metropolitan banking pool with USD185bn annual revenues by 2025

Key drivers

CAGR,%USDtrn, growth

11%

14%

19%

32%

MENAOther Europe

23%

5,180

7%3%

5%

1%

15%

UK

Other LatinAmerica

Other NAFTA

US

Other Asia

Mainland China

20252010

1,627

1%

15%

4%

7%

33%

11%

12.0%

CAGR,%

10.2%

5.7%

6.1%

9.6%

3.9%

7

GDP growth of key geographies Banking revenue pool3

40

Pearl River Delta: Develop domestic business of scaleStrategic actions for the Group: Investments in Asia

1. 2008-2020 development blueprint for the PRD by NDRC (National Development and Reform Commission); includes Hong Kong and Macau2. Closer Economic Partnership Agreement (CEPA) is a free trade agreement concluded by Mainland China and Hong Kong3. Rank of country / Chinese province, respectively, by GDP4. Trade is measured as total Exports and Imports; Source: Global Insights, March 2015, National Bureau of Statistics of the People's Republic of China

Leverage on Hong Kong market leadership– Proximity; 60m+ Cantonese speakers– Closer links, both infrastructural or virtual,

expected to foster stronger economic and financial integration

Strategic relevance for HSBC

Government policies and medium-term outlook

NDRC 2008-2020 development blueprint for PRD1

– Position the PRD as a "leading economic powerhouse”

– Act as both an “advanced manufacturing and modern service base” and an international gateway for China

Official goals for the PRD region by 20201

– GDP per capita: RMB135k– Service industry / GDP: 60%– Urbanisation level: 85%

CEPA2 has accelerated integration and financial markets development

Guangdong economy of global relevance– Guangdong represents c.10% of GDP and

c.26% of trade in China– The Pearl River Delta (PRD) accounts for 85%

of GDP and 96% of trade in Guangdong(equiv. to c.30% of GDP and c.90% of trade in UK)

Economic size

Thailand 387Hunan 396Hubei 398UAE 402

Sichuan 424

Liaoning 437

Hebei 457

Taiwan 511

Henan 519

Nigeria 523

Zhejiang 606

Switzerland 686

Indonesia 869

Shandong 883

Jiangsu 955

Guangdong 1,003857

Mexico 1,262UK 2,678

Pearl River Delta already a leading global economy

2013 GDP4, USDbn

Rank3

15

16 20

25

27

29

31

1 2 3

4

5

6 7 8

9 10

6

2013 Trade4, USDbn

25

36

65

55

60

444

620

114

573

147336

694358

267551

1,0921,047

7611,135

Pearl River Delta

Global country rank#China province rank#

7

Guangdong / Pearl River Delta opportunity, leveraging on strong position in Hong Kong

41

ASEAN: Leading bank in ASEANStrategic actions for the Group: Investments in Asia

1. Constant currency (2010 USD basis). Source: Oxford Economics2. 2014-25 CAGR3. Source: McKinsey, “Understanding ASEAN: Seven things you need to know, 2014"4. Source: company reports, Central Bank, IMF5. Largest by branch network

Third fastest growing trade zone

2014-25 real exports1, USDtrn

2.81.5

+5.5%2

% Global trade c.7% c.8%

70 54<USD7.5k

>USD7.5k

178

124137

67

Million households per income bracket3

Large emerging middle class

Fast growing cities3

ASEAN

Rest of world

Top 500

15

485Top 500

7493

2014 2025

2010 2025

Top cities by GDP

Fastest growing cities

Priority markets

Vietnam

Malaysia

Indonesia

Brunei

Philippines

Thailand

Singapore

Other presence

Expand domestic marketposition; strengthen connectivity with other Asian markets

AspirationCurrent position

Loan market share4

Number of branches

3.6%

11

Expand position as leading5 foreign bank and leadership in Amanah Franchise

AspirationCurrent position

Loan market share4

Number of branches

3.4%

68

Malaysia

Singapore

Integrate Bank Ekonomi and HSBC Indonesia operation; combined presence in30 cities

Indonesia

Number of cities

Strong position in a fast growing economic zone HSBC’s unique position in ASEAN

7

42

Global market leadership in RMB driving revenue growth 8Strategic actions for the Group: RMB internationalisation

50

50

80

80

80

80

Australia

Singapore

Korea

France

Germany

Hong Kong 270 #1

#1

#1

#1

#1

#1

#1

HSBC participation

Quota9, RMBbn

United Kingdom

2017target

+17%

2014

1.7

2013

1.5

2-2.5

+96%

Bonds2 1st Ranked 1st in the CNH league table since 2011

Offshore RMB Financing3

+27% Year on year growth in offshore RMB assets as of 1Q15

Cross-border RMB Flow6 >90%

2013 / 14 growth in cross-border RMB flows from HSBC China

Securities Services5 >40% Market share in RQFII

custodian business as of 2014

Foreign Exchange4

2013 / 14 growth in FX volume with increasing use of RMB as trade and investment currency

Scale in China7 2nd

HSBC China’s ranking amongst all banks in Shanghai for RMB cross border transaction volume

1. HSBC internal definition of International RMB revenues being offshore revenue where any portion is denominated in RMB and onshore revenue from Global Markets, BSM and Capital Financing (excluding Credit and Lending) that is denominated in RMB

2. Bloomberg CNH Bond League Table3. Offshore RMB lending balance. Source: HSBC4. FX transactions through Global Markets. Source: HSBC

5. Source: Estimated market share of onshore custodian business of approved RQFII quota holders. Source: SAFE & HSBC6. Source: HSBC7. Source: PBOC8. ‘Active’ refers to where a custodian has been appointed in a market and approved by SAFE9. Based on public announcements

HSBC RMBI revenue1

USDbn

Market-leading capability in RMB products First in all active8 RQFII markets

43

Complete implementation of Global StandardsStrategic actions for the Group: Global Standards

1. Financial Crime and Compliance

20142011

1.7x

c.5x Global platform to manage risks(“Run the Bank”)

Investments in new systems (“Change the Bank”)

2017

Expected peak in 2016

Gradually reduce investments in change the bank (e.g. systems)

Commenced de-risking, added sixth filter

Enhanced customer selection focus

Private Bank tax transparency

FCC1 Function expanded Global Risk governance

framework enhanced Global policies on AML

and sanctions issued Financial intelligence and

investigation units set up Training and awareness

campaigns for 250,000 employees

Embedded global AML and sanctions policies

Customer Due Diligence to new Global Standard implemented in all markets

Continue to strengthen risk controls

Improved data quality for existing and new customers

Continue to enhance compliance infrastructure

Embedded in day-to-day risk management practices

Sustainable and effective financial crime risk management controls

Continuous monitoring

2015-2017

Until 2014

2017+

Key benefits for the Group Long-term competitive advantage (early mover) Increased quality of earnings Reduced risk of future fines

Est. peak over

2015-17

Global Standards – key initiatives

9

Global Standards investmentUSDbn

44

Structured review of Location of Holding Company to maximiselong-term shareholder value

Strategic actions for the Group: Review location of Holding Company

Review launched in April 2015 at request of HSBC Holdings plc Board

Completion of review by end 2015

HSBC Holdings plc Board decision by 2015 year end

Subsequent shareholder and regulatory approval if required

A Economic importance and future growth

C Highly competitive economy

E High Transparency International score

G Robust commercial environment, including enforceability of relevant laws

H Tax system

I Government policy in support of growth and development of financial services sector

J Robust regulatory environment that supports Global Standards

K Financial impact for the Group

D Long-term stability

F Ability to attract and retain top talent

10

Criteria include at least

B Scale of existing HSBC presence

45

>10

>10

7.3-8.97.3

Group ROE targeted to reach >10% in 2017; momentum for higher returns in future


1. Cost growth includes an increase in the UK bank levy rate

Reduce Group RWA

GB&M & CMB RWA reduction

Business growth, including International network growth Investments in Asia RMB internationalisation

1

678

2014

US CML run-off

Brazil and Turkey2

Turnaround Mexico, US3

Cost saves5

Capital build

2017 target, excluding cost to achieve

2018 target

2017 costs to achieve, including CML run-off costs

2017 target

Significant items and currency translationGroup ROE, %

ROE 10%

Cost growth1

ROTE, %

8.5-10.4

c.12

>12

Cost management

46

Actions to capture value from our global presence in a changed worldStrategic actions for the Group

1. Plan to maintain a presence in Brazil to serve large corporate clients with respect to their international needs

1. Reduce Group RWA by at least c.25% and re-deploy towards higher performing businesses; return GB&M to Group target profitability

2. Sell operations in Turkey and Brazil1; continued application of six filter process

3. Rebuild NAFTA profitability

4. Set up UK Ring-Fenced Bank

5. Realise USD4.5-5bn cost savings, deliver flat costs by end 2017

6. Deliver growth above GDP from international network

7. Capture growth opportunities in Asia: Pearl River Delta, ASEAN, Asset Management, Insurance

8. Extend leadership in RMB internationalisation

9. Complete Global Standards implementation

Complete Headquarters review by end of 2015

4

9

10

7

1

5

8

6

2

3

47


Strategic actions2




Cost management

Financial targets

48

Key messagesCost Management

HSBC delivered USD5.7bn of savings 2011 – 2014

Moved to a global operating model and realised initial benefits from global scale (e.g. organisational model, procurement, property and moving roles to offshore service centres)

Savings offset inflation and investment in growth 2011-2014

However, increased regulatory, compliance and bank levy costs pushed overall costs up over the period

We will take out USD4.5-5bn of costs 2015 – 2017, increase productivity and enable growth

Now HSBC has globalised we can re-engineer the Global Businesses and Global Functions, particularly IT and Operations, to leverage our global scale

c.10% reduction in Group FTEs, before re-investment in growth initiatives and compliance

We have a clear plan to deliver these savings through:

Continued investment in digital to make it easier for customers to do business with us

Implementing tools for our front-line colleagues to make better use of their time

Automating more of our operations to get more out of our high quality low cost service centres

Getting more for less from what we spend on our technology

49

Delivered USD5.7bn in cost savings 2011-14 through organisation design, operating model, procurement and property

Cost Management

2010-14 cost walkUSDbn Changed operating model to operate at global

scale– Globally consistent and simplified

organisation: Global Businesses, Global Functions and HTS

– Global operating models implemented in RBWM & CMB

Initial achievements from leveraging global scale:– Global organisation re-design with fewer

management layers: USD1.4bn– RBWM Global Operating Model:

USD0.8bn; 12K roles reduced– Procurement scale efficiencies: c.USD1bn

– e.g. global facilities management contract– Moved roles to at-scale low cost / high

quality service centres: USD0.5bn savings– Offshore mix from 16% in 2010 to 21%

today– Reduced property footprint by 8m square

feet: USD0.4bn savings

Key drivers of 2011-14 savings

Focus going forward will be on re-engineering to take advantage of global economies of scale

4.5

1.3

2.0

1.1

1.5

(5.7)

37.7

(4.5)

33.2

37.9 Business growth, e.g. FX

eCommerce, RBWM Wealth, Asia expansion

Global Service Centres expansion

Estimated average inflation c.3.4% p.a.

Average adjusted cost base c.USD34.5bn

Banklevy

Misc. 2014 adj.

Regu-latoryprog./

compliance

Growth/invest-ments

Inflation(estimate)

Cost savings

2010 adj.

Significant items

2010

50

0.5

FX rate impact1

(2.3)

2014 adj.

37.9

(4.5-5.0)

2014 adj. excl.

Brazil / Turkey

Inflation

2.5-2.8

Trans-formation savings

Brazil / Turkey

(3.6)

32.0

2017 exit run-rate target

32.0

Bank levy2

Regulatoryprog./

compliance

c.0.1

Incremental growth

1.4-1.6

Group to deliver USD4.5-5.0bn in cost savings to make 2017 exit run-rate adjusted costs flat against 2014

Cost Management

1. Impact of change from 2014 reported FX rate to 1Q FX rate2. Bank levy forecast based on bank levy rates effective from 1APR2015 and 2014 year-end balance sheet

2014-17 exit run-rate target cost walk

Flexibility to increase savings if investment or inflation exceeds current estimate

Investments to support revenue growth primarily in Asia

USDbn

51

Transformation will require USD4.0-4.5bn investment and will deliver a much better front-office to back-office cost ratio

Cost Management

“Back Office”Run the BankGlobal Functions& HTS

“Front Office”Run the BankGlobal Businesses

Change the BankBank Levy2

2017 exit run-

rate target

32.0

c.39%

c.48%

c.8%c.5%

2017201620152014 adj. excl. Brazil & Turkey

32.0

46%

43%

8%3%

Transfor-mationcost to achieve1

Adjusted operating expenses3

(excluding cost to achieve)

USDbn

2014-17 exit run-rate cost target

USD4.0-4.5bn cost to achieve

USD4.0-4.5bn cost to achieve between 2015 – 2017

– c.80-90 cents per dollar of savings

Cost to achieve includes:

– Property exits

– >USD1bn spend on accelerating digital and automation programmes

– FTE reduction costs

Front-office to back-office cost ratio will significantly improve

2015 – 2017 adjusted jaws excluding cost to achieve will remain positive

1. Transformation costs to achieve are the costs required to achieve the transformation savings. It includes restructuring and other transformation costs. 2. Bank levy forecast based on bank levy rates effective from 1APR2015 and 2014 year-end balance sheet.3. Excluding Brazil and Turkey

52

Like-for-like FTE will reduce by c.10% before re-investment in business growth and compliance

Cost Management

258

295

(c.25)

FTEDEC2014

2011-2014

reduction

(37)

FTEDEC2010

Business growth & regulatory investment

2017Brazil /Turkey

c.233

Trans-formation savings

FTE post-impact of disposals

(22-25)

2010-17 FTE development'000

Cost management initiatives to decrease FTEs by c.22-25k

– Like-for-like reduction of c.10%

– Natural attrition c.11% in 2014

Average cost per FTE to decrease on a like-for-like basis due to increased use of low cost/ high quality locations

Reductions partly re-invested for growth and compliance

Mix shift from back-office to frontline and towards growth opportunities

53

Deliver IT projects more effectively – (e.g. ‘buy more off-the-shelf’, increase use of Agile development process)

Move software development roles to low cost / high quality locations– from 50% to 75% of roles

Eliminate 750 of existing c.6,700 applications Consolidate hardware and use more Cloud platforms

Concrete actions underway to enable growth and deliver USD4.5-5.0bn in cost savings

Cost Management

Digital investment and productivity improvement

Re-shape Global Functions

Simplify software development and optimise IT infrastructure

Other initiatives

Automate and re-engineer operations

Enhanced digital capabilities and self-service Better tools for advisors, relationship managers and tellers Reduced administrative roles 12% fewer branches, 20% lower branch square feet in top 7 markets

Finance: re-engineer and automate processes, reduce demand, move Finance roles to low cost / high quality locations

Risk (excl. Compliance): simplify processes (e.g. retail credit risk), increase use of low cost / high quality locations

Clear plan for real estate in key markets Simplified organisation structure (c.13k dual reporting lines removed)

Streamline and automate processes Move operations roles to low cost / high quality locations

– from 60% to 70% of roles Consolidate service centres to specialise in fewer businesses/ processes

Key cost reduction actions underway

Procurement External spend reduction, e.g. through supplier consolidation

Target savingsUSDbn

4.5-5.0

0.9-1.0

0.6-0.7

1.1-1.2

0.6-0.7

0.8-0.9

0.4-0.5

Net role reductionsFTE '000

7-8

2.5-3

n/a

0.5-1

12-13

22-25

n/a

Discussed in further detail on following pages

1

2

3

4

5

6

54

Digital investment and productivity improvement; enabling growth at lower cost

Cost Management

Reduce branches

12% fewer branches, 20% less square feet in top 7 markets USD c.135m real estate savings

Better tools to drive frontline productivity

Better tools for tellers and relationship managers rolled out in all key markets– E.g. single customer view, contact history

Target c.15% increase in RBWM advisor productivity Redeploy c.850 CMB RMs from low to high growth markets

Enhanced digital capabilities and self-service

Reduce frontline sales and service roles by migrating transactions and interactions to digital and self-service channels, e.g.:– Text message and email balance alerts– Mobile payments and single click purchases – Simple, user-friendly security checks

Total digital investment of >USD1bn 2015-17 Reduce c.2k servicing roles

Reduce back-office activity

Fewer forms, signatures and administration Fewer administrative roles required in network Reduce 5k-6k FTE

UK RBWM examples

Simplifying Growth Programme – Results

New digital tools and products

Digital investment and productivity improvement to reduce 7-8k roles and deliver USD0.9-1.0bn savings

1511

Pilot Results

2014 Baseline

94

Pilot Results

2014 Baseline

“Bank on a tablet”

Meetings per advisor per week

Customer needs met per advisor per week

+36%+105%

1

Actions underway

55

Automate and re-engineer operationsCost Management

2

Key data once for multiple systems (e.g. change of address)

Fully automate data transfer between systems Leverage improved front-end systems, imaging and

workflow Automate and eliminate “checking” (e.g. data validation

and MI) 9k-9.5k role reductions, c.USD425-475m savings

Light automation and process improvement 2.5k-3k roles reduced, c.USD100-110m savings

From 4-5 businesses/functions in each service centre to 2-3

From 9-11 product processes in each service centre to 4-6

Simplify processes

Consolidate service centres

Automate processes

Develop industry utilities

GB&M “Know Your Customer” utility; c.USD60m savings

c.5k operations roles moved to low cost / high quality locations– From 60% to 70% offshore mix– c.USD175-200m saving

Move roles to low cost / high quality locations

CMB credit process optimisation

-37%

TargetCurrent

UAE “Time to yes” (days)

-30%

Target

c.2k

Current

c.3k

Credit process FTEs

Other example CMB process optimisation opportunities

Trade middle office

Manual payments

c.400 operations role reductions

c.600+ operations role reductions

Automate and re-engineer operations to reduce 12-13k roles and deliver USD0.8-0.9bn savings

CMB examplesActions underway

56

Cost Management

Simplify software development and optimise IT infrastructure3

Optimise infrastructure and hardware

Simplify platforms and eliminate 750 applications Use Cloud platforms for non-business critical systems

(e.g. HR) Reduce in-country data warehouses c.USD325-375m savings

Simplify

Focus on top 10-15 markets Build for 3-5 markets, roll-out to the remaining priority

markets Use fewer, simpler systems in remaining markets

Leverage Global Standards investment Use improved customer data to digitise and automate

Focus on data

Build better software

Buy more “off-the-shelf” market standard – target c.40% of new applications– E.g. Avaloq in GPB, Financial Crime Prevention systems

Increase use of ‘Agile’ (all in the same room) development c.USD300-350m savings

Consolidate software development

75% of software engineering to be done in India and China (from 50% today)

Consolidate supplier spend c.USD475-525m savings

Application rationalisation examples(number of global instances)

Target

80%

20%

Current

50%

50%Remaining

c.4k

Top 5Top 4

IT supplier spend concentration

Business InternetBanking

14

41

TargetCurrent

311

TargetCurrent

Personal InternetBanking

Remaining

Simplify software development and optimise IT infrastructure to deliver USD1.1-1.2bn savings

Actions underway Examples

57

Cost Management

Lower Costs & Fewer Roles

Enable Business Growth

Enhanced tools for frontline colleagues Improved digital capabilities

Fewer FTEs and lower cost per FTE Lower growth in property costs Lower like-for-like third party spend

More effective IT

Fewer, less costly applications Lower IT infrastructure costs

Enhanced Operations

More straight-through-processing Lower unit costs per product across all businesses

and functions

Outcomes Key metrics

Front Office: Back Office Ratio

Operations offshore roles mix

Manual payments as % of total

Key outcomes: Enable business growth and reduce costs USD4.5-5bn

2014 2017 target

40% 30%

70%60%

OnshoreOffshore

1.4%

3.2%

Better Customer Outcomes

Faster turnaround times Simpler and more relevant customer interactions

1. Includes Digital, third party and ATM sales

Enhanced controls through automated MI, sampling and checking

Fewer manual checks required due to increased STP and process automation

More Robust Controls

RBWM Digital sales volume1

(top 7 markets)

+75%

43%

46% c.39%

c.48%

"Back Office" Run the Bank GFs/HTS

"Front Office" Run the Bank GBs

Change the Bank

Bank Levy

58


Strategic actions2




Cost management

Financial targets

59

Strong structural balance sheet; organic capital accumulationFinancial targets

1. Includes Reverse repurchase agreements non-trading and other assets2. As defined by the EU LCR delegated regulation, after application of prescribed haircuts3. Of which, USD438bn included in reported Group consolidated LCR4. Includes repurchase agreements non-trading, liabilities under insurance contracts and other liabilities

Other1

Fin investments

Loans to banks

Loans to customers

Trading, derivativesand Fin assets

Cash

2014

2.6

0.3

0.4

0.1

1.0

0.7

0.1

ADR, % 72.2

High Quality Liquid Assets2, USDbn 5213

EquityOther4

Debt securities

Trading, derivativesand Fin liabilities

Deposits by banks

Customer accounts / deposits

2014

2.6

0.20.30.1

0.6

0.1

1.4

0.2Financial instititutionsDeposits7

Corporate and CommercialDeposits

0.5

Personal Deposits 0.7

Sources of customer accounts / deposits

USDtrn

CET15, % 11.1

CET1 capital5, USDbn

Average 2011-14 capital accumulation, USDbn p.a.

Group consolidated LCR8, NSFR8, as at 31DEC14

>100%

5. CET1 ratio and CET1 capital on an end-point basis6. On an EU Delegated Act basis7. Includes operational deposits from custody, clearing and cash management8. As reported

136

9.1

4.8Leverage ratio6, %

Assets2014, USDtrn

Liabilities2014, USDtrn

60

Re-investment

Capital requirements and generation

Capital management actions; improve returnsFinancial targets

1. Multiple Point of Entry2. Total Loss Absorbing Capacity3. Progression of dividends should be consistent with the growth of the overall profitability of the Group and is predicated on the ability to meet all capital requirements in a timely manner

Drivers to achieve financial targets

Jaws

Dividend

ROE

Positive (adjusted, excluding cost to achieve)

2017 exit run rate costs flat against 2014 (adjusted basis)

Costs to achieve of USD4.0-4.5bn

Progressive3

>10%

Group financial targets: Outcomes

Capital management actions

Gross RWA reduction – at least 25%, Group ex Associates (c.USD290bn)

Action plan to improve returns for each Global Business

1

Management estimate of required CET1 ratio in 2019 of 12-13%

GSIB driven by cross-jurisdictional score, despite resolvable MPE1 structure

Estimated TLAC2 funding gap of USD12.5bn-USD44.0bn

Refocus over 2/3 of RWA capacity to higher return businesses

2

3

61

Actions in place to improve returnsFinancial targets: Drivers to achieve financial targets – Capital management actions

1

2014 RoRWA22017E RoRWA3Revenue

Operating expenses (exit run rate) RWA impact

2014-17 RoRWA drivers

Continued application of 6 filters

RBWM ex US CML run-off ex Associates

CMB ex Associates

GPB 5

ex Associates

GB&M ex Legacy ex Associates

Group, adjusted4

Global Business adjusted returns1

4.8% 6.3%

2.3% Invest Invest 2.7%

3.4% Maintain Reduce 4.3%

1.7%(1.4% excl. BSM)

Maintain Reduce2.7%

(2.5% excl. BSM)

1.9% Grow Maintain Reduce >2.3%

Maintain Invest

Positive impact

Limited

Limited

Positive impact

Positive impact

Associates, run-off portfolios and “Other” Global Business

Grow

1. Adjusted PBT and RWA2. 2014 RoRWA on average period RWA basis and excludes the effect of the exits of Brazil and Turkey and reclassification of Business Banking from CMB to RBWM3. 2017 RoRWA estimates on a CRD IV end-point RWA basis on 2 point average4. In addition to performance of Global Businesses, Group RoRWA includes effect of Group “drags” (bank levy and other costs, Run-off portfolios (GB&M legacy credit and US CML and Associates) but excludes impact of

significant items5. Due to the nature of its business, GPB measures the performance of its business through other measures including Net New Money and Return on Assets

62

1.1

2.5

4.5

Management estimate of required CET1 ratio in 2019 of 12-13%Financial targets: Drivers to achieve financial targets – Capital requirements

For footnotes refer to Appendix

2

Pillar 2A subject to change over time; PRA revised framework will apply from 1 Jan 2016

Countercyclical Capital Buffer (CCyB) and other macro-prudential requirements– Hong Kong CCyB rate of

0.625% from January 2016, possibly up to 2.5% over time

– Sectoral Capital Requirements

Pillar 2B / PRA buffer4 generally allowed to be offset by Capital Conservation and G-SII buffers with potential residual subjective charge

11.2%HSBC CET1 ratio as at 1Q15 (end-point)

Known and quantifiable CET1% requirement (end-point)

10.6%

G-SII3

Pillar 2A2

CET1 CRD IVminimum

Management estimate of CET1 requirement(end-point basis)

2.5

12-13

1.5 -2.5

Other regulatory and management buffer

Capital Conser-vation Buffer

Common Equity Tier 1 ratio, Pillar 2A and buffers1

%

2019 end-point basis

Regulatory requirements 2014 – 2019

Emerging clarity on broad regulatory agenda

Pillar 2 and other capital buffers

Leverage ratio

Revised Counterparty Credit Risk Standardised and Securitisation framework

Ring-fencing and Bank Structural Reform

Certain regulatory uncertainty and headwinds remain

Basel revisions to the RWA framework

Capital floors and other macro-prudential measures

TLAC and G-SIB ongoing developments

63

Cross-jurisdictional score driver of GSIB surcharge; not complexityFinancial targets: Drivers to achieve financial targets – Capital requirements

Source: Company submissions1. Calculated as Indicator score (bps) multiplied by 0.2. Indicator score is calculated as individual bank indicator (euros) devided by denominator (euros) and multiplied by 10,000; scores calculated according to FSB methodology

Bucket 5 (530-629)

Bucket 4(430-529)

Bucket 3(330-429)

Bucket 2(230-329)

Buckets (scores)

Bucket 1(130-229)

GSIB surcharge

1.0

1.5

2.0

2.5

3.5

CET1, %

Cross-jurisdictional activity

Substitut-ability

Total

Category

Size

Inter-connected-ness

Complexity

JP Morgan

646504

173

242100

87

66

78

Score1 (bps)

HSBC

477

74

88

83

158

73

Citibank

493426

101

168100

85

77

63

Deutsche Bank

445417

109

128100

60

96

53

BNP Paribas

97

74

101

74

61

407

Barclays

51

126

62

59

86

384

Bucket 4 Bucket 3

2

None

Banks

Based on 31 December 2013 submission

64

Adverse currency movements mask management actionsFinancial targets: Drivers to achieve financial targets – Capital requirements

Source: Company submissions1. The denominator for calculating a bank’s GSIB is obtained from a large population of banks. Since the 2014 denominator is not yet known, HSBC’s scores shown above have been indexed to the 2013 scores

Category2013 submission (published May 2014)

Currency effect

Other effects

2014 submission (published May 2015)

Cross-jurisdictional activity

Substitutability

Total

Size

Inter-connectedness

Complexity

100

100

100

100

100

100

107

113(128 without cap)

99(102 without cap)

111

88

67

+13%

+15%

+13%

+10%

+8%

-5%

+13%

-2%

-23%

-41%

+9% -10%

Indexed, 2013=100% increase / decrease

% increase

2

HSBC score, indexed to 2013 submissions1

Based on 31 December 2013 submission

65

7.9%1.7%

5.4%

15.8%15.7%13.8%

TLAC requirements1Financial targets: Drivers to achieve financial targets – Capital requirements

For footnotes, refer to Appendix Note: 21% / 25% correspond to TLAC requirements of 16% / 20% + 5% (Systemic and Capital Conservation Buffers)

Group PRA basis RWA mix by resolution entity (including Associates)3

Subsidiary proforma TLAC as a proportion of RWAs, with shortfalls to 21% and 25%2

%, USDbn

Local regulatory capital

Senior debt

25%

21% 12.7

Under an MPE resolution strategy TLAC will be applied to subsidiary resolution entities based on local RWAs

TLAC is subject to future capital and RWA developments

Existing senior debt would need to be refinanced to be TLAC compliant

Cost of compliance (at the lower end of the 21% - 25% range) estimated to be USD200-300m p.a.5

The Hongkong and Shanghai

BankingCorporation

Limited

HSBC Bank plc

HSBC USA Inc.

2

Potential shortfall, USDbn 14.0 5.1

12.6

c.20%4

HSBC Group

HSBC USA Inc.

HSBC Bank plc

The Hongkongand ShanghaiBankingCorporationLimited

Other entities

380 349 133Local RWAs, USDbn

c.80%

66

RWAs refocused towards higher return businessesFinancial targets: Drivers to achieve financial targets – Re-investment

1. Excludes RWA from Associates: 2014: c.USD160bn, 2017: c.USD180bn2. GB&M actions includes reductions in Legacy Credit, Markets (Rates), Capital Financing and GTRF

3

Group RWA

USDbn

Capital investment

By Global Business

Principal RBWM

CMB

GPB

GB&M

Asia

Europe

NorthAmerica

MENA

By geography

LatinAmerica

c.USD290bn reduction

c.755>25%

End 2017ex-Associates1

Impact ofpotential

regulatory changes

Business growth and other 180-230

2014 proforma ex-Associates1

US CML run-off c.40

Brazil, Turkey and other management actions c.110

GB&Mmgmt.

actionsc.140

2014 FX adjusted ex-Associates1 c.1,045

Associates and currency translation c.175

2014reported 1,220

671. Cost growth includes an increase in the UK bank levy rate

ROE outcomes; momentum for the futureFinancial targets: Outcomes – ROE

>10

>10

7.3-8.97.3

Reduce Group RWA

GB&M & CMB RWA reduction

Business growth, including International network growth Investments in Asia RMB internationalisation

1

678

2014

US CML run-off

Brazil and Turkey2

Turnaround Mexico, US3

Cost saves5

Capital build

2017 target, excluding cost to achieve

2018 target

2017 costs to achieve, including CML run-off costs

2017 target

Significant items and currency translationGroup ROE, %

ROE 10%

Cost growth1

ROTE, %

8.5-10.4

c.12

>12

Cost management

68

Group to deliver USD4.5-5.0bn in cost savings to make end 2017 run rate adjusted costs flat against 2014

Financial targets: Outcomes – Positive jaws

1. Impact of change from 2014 reported FX rate to 1Q FX rate2. Bank levy forecast based on bank levy rates effective from 1 April 2015 and 2014 year-end balance sheet

0.5

3.6

2.3

32.0

Brazil /Turkey

FX rateimpact1

2014 Adj.

37.9

2014 Adj.excl.

Brazil / Turkey

2017 exitrun-ratetarget

32.0

Banklevy2

Regulatoryprog. /

compliance

c.0.1

Incrementalgrowth

1.4-1.6

InflationTransform-ation

savings

4.5-5.0

Cost walk: 2014 to 2017 exit run-rate targetUSDbn

Savings may be increased if investment exceeds current estimate

Investments to support revenue growth primarily in Asia

2.5-2.8

69

Transformation will require USD4.0-4.5bn investment and will deliver a much better front-office to back-office cost ratio

Financial targets: Outcomes – Positive jaws

“Back Office”Run the BankGlobal Functions& HTS

“Front Office”Run the BankGlobal Businesses

Change the BankBank Levy2

2017 exit run-

rate target

32.0

c.39%

c.48%

c.8%c.5%

2017201620152014 adj. excl. Brazil & Turkey

32.0

46%

43%

8%3%

Transfor-mationcost to achieve1

Adjusted operating expenses3

(excluding cost to achieve)

USDbn

2014-17 exit run-rate cost target

USD4.0-4.5bn cost to achieve

USD4.0-4.5bn cost to achieve between 2015 – 2017

– c.80-90 cents per dollar of savings

Cost to achieve includes:

– Property exits

– >USD1bn spend on accelerating digital and automation programmes

– FTE reduction costs

Front-office to back-office cost ratio will significantly improve

2015 – 2017 adjusted jaws excluding cost to achieve will remain positive

1. Transformation costs to achieve are the costs required to achieve the transformation savings. It includes restructuring and other transformation costs. 2. Bank levy forecast based on bank levy rates effective from 1APR2015 and 2014 year-end balance sheet.3. Excluding Brazil and Turkey

70

Improved returns and capital management to deliver financial targetsFinancial targets: Outcomes – Summary

1. Excludes currency translation and significant items2. Progression of dividends should be consistent with the growth of the overall profitability of the Group and is predicated on the ability to meet all capital requirements in a timely manner3. As defined by the EU LCR delegated regulation, after application of prescribed haircuts4. Figures are as at 31 December 2014, unless otherwise stated

Jaws

Dividend

ROE

Positive(adjusted1, excluding cost to achieve)

Progressive2

>10%

Group financial targets: Outcomes

Strong balance sheet4

– Average capital accumulation between 2011 – 2014 USD9.1bn

– High quality liquid assets3 USD521bn

– Consolidated LCR, NSFR >100%

– Leverage ratio 4.8%

Clearly defined actions to improve returns

RWA capacity to be re-invested in higher return businesses

Strong track record of progressive dividends

Delivering our strategy

71


Strategic actions2



72

UAE

Saudi Arabia (SABB)

Pearl RiverDelta

Indonesia

UK

Hong Kong

Malaysia

Singapore

Mexico

UK

Shape of HSBC will be aligned to the world’s largest trade and economic zones; business mix further shifting towards Asia

Shape of the Group

Source: Annual reports1. End point basis

Coverage of largest trade and economic zones- Coverage of >90% of global GDP, global trade

and capital flows

RWAs, USDbnBy geography, RWA excl. Associates1 USDbn

RWAs, USDbnBy Global Business

xx%

-xx%-xx%

-xx%

-xx%

By business, RWAexcl. Associates1 USDbn

Priority markets Scale priority markets

NAFTA

MENA / GCC

EuropeanEconomic

Area

ASEAN

Greater ChinaMENA

L AmericaN. America

Europe

Asia

2017 target

>40%

2014 Reported

4%8%20%

34%

33%

3%

RBWMGPBCMB

GB&M(ex BSM)

BSMOther

2017 target

<1/3

2014 Reported

18%2%

31%

39%

7%

Global market presence

73

Actions to capture value from our global presence in a changed worldShape of the Group

1. Plan to maintain a presence in Brazil to serve large corporate clients with respect to their international needs2. Excludes currency translation and significant items; excluding cost to achieve3. Progression of dividends should be consistent with the growth of the overall profitability of the Group and is predicated on the ability to meet all capital requirements in a timely manner

Jaws

Positive(adjusted2, excluding cost to achieve)

Dividend Progressive3

ROE >10%

Group financial targets1. Reduce Group RWA by at least 25% and re-deploy towards higher

performing businesses; return GB&M to Group target profitability

2. Sell operations in Turkey and Brazil1; continued application of six filter process

3. Rebuild NAFTA profitability

4. Set up UK Ring-Fenced Bank

5. Realise USD4.5-5bn cost savings, deliver flat costs by end 2017

6. Deliver growth above GDP from international network

7. Capture growth opportunities in Asia: Pearl River Delta, ASEAN, Asset Management, Insurance

8. Extend leadership in RMB internationalisation

9. Complete Global Standards implementation

Complete Headquarters review by end of 2015

4

9

10

7

1

5

8

6

2

3

74

AppendixInvestor Update 2015

Supplementary informationB

A Transformation since 2011

I

75

From“The World’s Local Bank”

87 countries / territories 73 countries / territories

15 full country exits and 10 line of business exits since 2011

Footprint

Weighted to developed economies (56% of adjusted revenue1; 60% of adjusted RWAs2 in 2010)

Re-balanced business to Asia (from 29% of Group adjusted revenue1 in 2010 to 36% in 2014; adjusted RWAs2

from 29% to 40%)

Business Mix

Growth primarily through acquisition

Compensated sold / lost revenues through organic business growthGrowth

Geography-led structure High degree of localisation

Consistent Global Business and operating modelOrgani-

sation

Narrow leadership team Team of 250+ Group General Managers and Talent Pool

External talentLeadership

Over-reliant on local capabilities

3.2k Compliance staff

De-risked business model Global three lines of defence 7.2k Compliance staff (1Q15)

Risk and Compliance

Material transformation since 2011Appendix

Source: HSBC Holdings plc Annual Reports1. Revenue by geographical region include intra-HSBC items; this revenue has not been eliminated when calculating the above percentages2. RWAs are non-additive across geographic regions due to market risk diversification

Refocus

Six filters framework

78 disposals / exits

Legacy run-down

Simplify

Global management structure

8x8 organisation de-layering

FTE reduction of 13%

Protect

Global Standards

Conduct agenda

Strengthened culture

To“Leading International Bank”Transformation since 2011

II

76

Number of transactions announced

1.71.89.029.4

31.5

4.0

Six filter review led to 78 disposals / exits Appendix

1. Excludes JVs and Alliances; 78 disposals / exits were announced 2011-MAY2015. Out of these 62 disposals / exits were announced 2011-2013. 2. Based on consideration at the time of the deal announcement; values shown 2000-2010 for select transactions; value for 2011-May 2015 disposals includes all transactions >USD250m. Consideration is the value received

for the sale of a business for legal entity sales and the premium / discount to assets / liabilities received for the sale of a business for asset & liability transfers. The premium for the (i) US Cards and Retail Services sale and (ii) the US upstate NY branches sale is as at closing.

3. In 2002, acquired a 9.99% stake; in 2004, subscribed for new H-shares at its IPO; in 2005, acquired an additional 9.91% stake; in 2012-13, exited entire shareholding4. In 2004, acquired a 19.9% stake; in 2005, subscribed for new H-shares at its IPO; in 2007, acquired an additional 0.4% stake; in 2010, subscribed to its rights issue; in 2012, participated in its private placement5. Includes sale of RBWM operations in Chile and all operations in Costa Rica, El Salvador, Honduras, Colombia, Peru and Paraguay6. HSBC still owns a 0.88% stake in Industrial Bank

Consideration2, USDbn

Select transactions

Bank of Bermuda Lloyds (Brazil) Industrial Bank,

BoCom4

Metris (Cards) Banistmo

US Cards and Retail Services

US upstate NY branches

Ping An3

Panama Other Latin America5

Industrial Bank6

French regional banks Non-core UK card

portfolio

Bank Ekonomi CCF, Banque Hervet Demirbank TAS Ping An3

Bital Household

Disposals and exits

2003-062000-02 2011-May 20152007-10

Acquisitions

35

9

48

20

24

23

6

78

Transactions1

III

77

Established global organisation with consistent operating modelsAppendix

1. As of 1Q15, there are 9 committees of the Holdings Board; not shown above are the Remuneration Committee; Nomination Committee; Philanthropic and Community Investment Oversight Committee; and the Chairman’s Committee

2. Sustainable savings target of USD2.5-3.5bn announced in 2011 for period of 2011-13

258

-13%

20142010

295

Execution in regions and countries

FTE, ‘000s

CMB GB&M RBWM4 Global Businesses

11 Global Functions

Global strategies

Globally consistent business and operating models

Aligned to Global Businesses

Globally consistent operating model

Rigour of governance, control, process efficiency, transparency

HSBC Holdings Board1

Governance and oversight from Group Board committees

Risk (including Compliance)FinanceHuman ResourcesCommunicationsMarketingLegalInternal AuditSustainabilityCompany SecretaryStrategy & PlanningHSBC Technology & Services (HTS)

Group Risk Committee

Conduct and Values CommitteeGroup Audit Committee

Financial Systems VulnerabilityGroup Management Board

GPB

Sustainable savings, USDbn

5.7

Actual 2011-14

Target2

2.5-3.5

Global organisation FTE and cost reduction

IV

78

Strengthened approach to Compliance and Conduct; reinforced values, culture and leadership

Appendix

Compliance (Global Standards)

Enhanced global AML & sanctions policies Standardised processes rolled out across global network Training & awareness campaigns for c.250,000 employees Global Standards engagement workshops for c.180k employees New financial intelligence and investigations units

Values and culture

Training: Values culture and leadership training; global employee

communication campaignReinforcement: Values incorporated into incentive frameworks for front line

employees

Evaluation: Values and behaviours embedded into performance

management evaluation criteria

Leadership Expanded Group leadership team to drive execution – from

102 in 2010 to 292 in 2014

80% of Group General Managers new appointments since 2011

Q1 2015

97%

Q3 2014

85%81%

Q1 2014

78%

68%

Awareness - Global StandardsAwareness - Ask the right questions

Q1 2015

81%

75%

Q3 2014

83%

76%

Q1 2014

69%65%

Personal ability to speak upBelieve in HSBC commitment to speak up

Revised sales incentives frameworks in retail banking Discontinued products (c.1,200 in RBWM) Established Conduct & Values Committee

Conduct Not surveyed

Actions taken since 2011 Employee survey results

V

79

Organic growth largely compensated disposalsAppendix

1. Note that the 2010 BSM numbers do not reflect the new management structure of GB&M which was put in place since 12 August 20132. Includes intersegment revenue

Revenue drivers 2010-14

USDbnCurrency translation and significant itemsAdjusted revenue

9.7 14.0 7.8

2014

62.0

(0.8)

2013

61.9

2.7

2012

60.5

2011

58.3

2010

58.5

72.368.3

64.661.2

68.2

USD3.5bnCAGR 1.5%

Principal RBWM, GPB, CMB, GB&M excl. BSM and legacy credit, and Other2

58.42010

Revenue associated with disposals

Gains on disposals

Change in other significant items

RBWM US run-off portfolio

Legacy Credit portfolio

BSM revenue1

2014

1.4

0.9

2.0

1.4

0.8

8.3

62.0

7.1

68.258.5 9.7

(0.8) 61.2

3.5

Currency translation and significant itemsAdjusted revenue

ReportedReported revenue 2010-14

USDbn

VI

80

Business mix re-balanced towards Asia and growth in CMB in line with strategy

Appendix

1. Excludes revenue recorded in Other. In addition, revenue also includes intra-HSBC items which have not been eliminated when calculating the above percentages. Percentages for adjusted RWAs exclude those recorded in other2. Revenue by geographical region include intra-HSBC items of USD2,305 in 2010 and USD2,970m in 2014. This revenue has not been eliminated when calculating the above percentages. RWAs are non-additive across geographic

regions due to market risk diversification effects within the Group

x% CAGR, 2010-14

Adjusted Revenue

Adjusted RWAs

Regions2Global Business1

38%34%

4%MENALatin AmericaNorth America

Europe

Asia

4%13%

13%

36%

11%

18%

29%

GPB

GB&M

CMB

RBWM run-off

Principal RBWM 37%

6%

21%

31%

5%

39%

2%

26%

29%

4%

30%

MENALatin AmericaNorth America

Europe

Asia

2014

5%7%

18%

40%

2010

5%6%

31%

29%

29%

13%

34%

30%

20%

14%

GPB

GB&M

CMB

RBWM run-off

Principal RBWM

2014

2%

31%

37%

5%13%

2010

2%

2%

(6)%

7%

0%

(19)%

Regulatory inflation (GB&M)

5%(6)%

2%

(1)%

7%

VII

81

AppendixInvestor Update 2015

Supplementary informationB

A Transformation since 2011

VIII

82

Footnotes to slide 62 – Management estimate of required CET1 ratio in 2019 of 12-13%1. A Capital Conservation Buffer (CCB) of 2.5% and a Global systemically important institution (G-SII) buffer of 2.5% will phase-in from January 2016. The

Systemic Risk Buffer has not yet been set – it is to be applied to the ring fenced bank from January 2019; if applied at the group level, we expect the higher of the G-SII and Systemic Risk buffer to apply. The Countercyclical Capital Buffer (CCyB) is currently 0% and is dependent on the buffer rates set by regulators applicable at the time; impact of announced rates (0.625% for Hong Kong from January 2016; 1% for Norway and Sweden from October 2015) currently estimated as not significant. Sectoral Capital Requirements (SCR) are currently not deployed in the UK. A residential mortgage floor is currently applied in Hong Kong. The requirements for G-SII, SCR, CCyB and PRA buffer are subject to change, dependent on circumstances at the time.

2. Pillar 2A guidance is a point in time assessment of the amount of capital the PRA consider the bank should hold, to meet the overall financial adequacy rule and is subject to change, pending periodic assessment and supervisory review process; Individual Capital Guidance (‘ICG’) was recently revised and a total Pillar 2A of 2% of RWAs is in effect from February 2015, of which 1.1% (56% of total P2A) is to be met with CET1 capital.

3. G-SII is the CRD IV equivalent of the Basel Committee’s / FSB G-SIB buffer.

4. As per PRA’s consultation paper CP1 / 15 “Assessing capital adequacy under Pillar 2” (issued in January 2015), to the extent there is duplication of risks being covered, the PRA buffer would be offset by some of the CRD IV buffers – namely, the G-SII and CCB. The risk management and governance scalar, if implemented and where applicable, would not be allowed to offset. Final Pillar 2 rules are expected in July 2015.

Appendix

IX

83

Footnotes to slide 65 - TLAC requirements

1. TLAC estimates are based on our interpretation of how the Financial Stability Board’s (“FSB”) November 2014 consultation document on the Adequacy of loss-absorbing capacity of global systemically important banks in resolution (“the FSB Consultation”) will be implemented in the main jurisdictions in which HSBC’s subsidiaries operate. Finalised TLAC requirements and local implementation of these may differ materially from the FSB Consultation.

2. The individual HSBC subsidiary entity estimates are based on 31 December 2014 balance sheets and reflect certain assumptions, these include but are not limited to: a. That HSBC would be resolved via a Multiple Point of Entry (“MPE”) strategy and that the subsidiaries represented in the chart would be “resolution entities”

(as defined in the FSB Consultation) in such an MPE strategyb. That TLAC has been applied to resolution entities based on local RWAs. Local RWAs can differ materially from Group RWAs, which are prepared on a PRA

basis. The local RWAs for The Hongkong Shanghai Banking Corporation are materially different from the equivalent RWAs on a PRA basis due to the different treatment of the investment in Bank of Communications Co. Limited; on a local basis the investment is deducted from capital, on a PRA basis the RWAs are proportionately consolidated

c. That there would be no consolidated HSBC Group TLAC requirementd. That the CET1 buffers for the resolution entities are aligned to the requirements applicable to the HSBC Group on an end-point basis i.e. 2.5% GSIB and

2.5% capital conservation buffers. Actual requirements in each local jurisdiction could be materially differente. That liabilities included in our estimation of TLAC are: regulatory capital less regulatory deductions (on a transitional basis); and senior unstructured and

unsecured debt with a residual maturity greater than 1 year, this includes debt which is not governed by the local law of the resolution entityf. That senior debt issued by operating banks is included. If the finalised proposals include a subordination requirement, this would need to be refinancedg. That no structured senior debt instruments have been included in the estimatesh. That for certain liabilities further guidance will be necessary, these include but are not limited to: senior debt not governed by the local law of the resolution

entity and structured notesi. That the analysis of TLAC deficits does not include any management mitigating actionsj. That there is no Pillar 2 TLAC requirement or management buffer, these would be incremental if includedk. That the TLAC leverage requirement is 6%, based on twice the Basel III Tier 1 leverage ratio of 3%. A 6% TLAC leverage ratio does not result in any

additional requirements above the risk based requirements included in the chartl. That the analysis does not reflect any future changes to the corporate structure of the HSBC Group, such as ring-fencing in the UKm. That the analysis does not reflect any future changes to capital rules, including new RWA requirementsn. That potential future increases in CET1 capital have not been included, although higher CET1 capital in future would potentially reduce the TLAC gap.o. That no deductions have been made for holdings in possible TLAC of other G-SIBsp. The Banking Recovery and Resolution Directive includes a requirement for EU banks to have a minimum amount of liabilities eligible for bail-in. Our analysis

is based on the FSB Consultation, final implementation of minimum bail-in requirements in the EU may differ materially from the proposals in the FSB Consultation

q. These assumptions may change as future regulatory guidance is received and the overall resolution strategy of the HSBC Group and its subsidiaries is determined and agreed by our regulators

3. Group 3rd party RWAs on a PRA basis as at 31 December 2014; Associates are included on a proportionate basis4. Other entities includes HSBC Finance Corporation (in run-off and comprising approximately 4% of Group RWAs) and other subsidiary banking entities5. This is an indicative analysis for illustration only. It uses current market pricing observations and other assumptions and does not factor in any potential credit

spread widening as a result of increased issuance or other future factors. Final costs of TLAC could be materially different from this estimate

Appendix

X

84

Value of the international network – further client examplesAppendix

Source: Company reports and websites, HSBC internal data

Client Client profileMarkets served Key products and recent deals

Top 5 global cement manufacturer Turnover USD16bn, operations in 50

countries

USD450m asset backed securities programme >USD4bn debt capital markets mandates 2014-YTD

2015 in US & UK Mexico supply chain solution

Asia – Middle East trade finance solution Advisory support on divestiture programme China cross-border USD cash pooling solution PCM mandates in 19 markets, including 9 in Asia

Top 3 global chemical producer Turnover USD58bn, operations in 35

countries

21

8

Largest global chemical producer Turnover c.EUR74bn, operations in 80+

countries

32 Relationship spans across 8 product types Successful implementation of Global Umbrella

Facility in 2010

Top tier life insurer and financial services company with over 24 million insurance customers and GBP496bn AuM

Turnover of c.GBP60bn with widespread presence in Asia, Europe and North America

Relationship spans across 9 key product types Joint Lead manager for GBP600m subordinated

bond issued in June 2015 Multi-jurisdictional provider of custodian, payments

and cash management, market counterparty services

23

China-Korea supply chain solution implemented Industrial conglomerate – leader in electronics, ICT, shipbuilding and construction

31

XI

85

Canada: Cities-led strategy; strong performanceAppendix

1. Source: Oxford Economics2. McKinsey Cities Revenue Pools3. RBWM, CMB and GB&M percentage of respective Global Business total PBT

Strong contribution to Group financialsCoverage of largest Canadian trade corridors

15

48

17

Canada-Mexico

Canada-UK

Canada-China

Canada-Japan 142

Canada-US 665

Top Canada trade1

corridors2014 reported PBT as % of Group3

4.1%

CMB

5.9%

RBWM

1.7%

Total

4.4%

GB&M

Coverage focused around key international cities

Key sectors

Oil & Gas, consumer products, machinery

Oil & Gas, transport, machinery

Agriculture, transport, machinery

HSBC coverage

0.9

1.5

1.6

5.1

5.7

8.3

Halifax

Quebec

Winnipeg

Calgary

Vancouver

Montreal

Toronto 15.6

2010 revenue pool2, USDbn

10

19

5

17

1

0

2

# HSBC branches# HSBC CMB centres

5

5

6

2

1

1

1

Main area of focus

XII

86

RegulationAppendix

DescriptionProposed timeframeEstimated impactCurrent position

Fundamental review of trading book (FRTB)

Redefinition of trading book Replacement of market risk

framework

2018 Impact dependent on calibration and scope of application

Industry wide BCBS QIS exercise undertaken

Further calibration required

Revised Counterparty Credit Risk Standardised

Impact dependent on extent of IMM and margin usage

2017 Replacement of Current Exposure Method

Yet to be adopted by EU

Securitisation framework

2018 Limited impact expected Active disposal of Legacy

securitisation in line with strategy

Amended hierarchy of risk weight calculations and change in focus away from external credit ratings

BCBS standard final, subject to simple securitisation framework

Yet to be adopted by EU

Revisions to Pillar 1 Standardised (operational risk)

2018 Limited overall capital impact expected

Replacement of Gross Income with Business Indicator to address deficiencies in Pillar 1 framework

PRA Pillar 2A framework contemplates a Pillar 2A charge which should reduce with improved Pillar 1 measure of risk

Revisions to Pillar 1 Standardised (credit risk)

2018 Regulationin consultation

Re-focus away from external credit ratings with revised, less sensitive risk drivers

First consultation launched late 2014 by BCBS

Under discussion with BCBS, regulators, industry

Credit Valuation Adjustment

2016 / 2018

BCBS review of CVA risk EU consideration of EBA

exemptions

BCBS review to be added to FRTB

Exemptions under review by local competent authorities

Possible offset of exemption and re-calibration

Risk of Pillar 2 charge in short to medium term

Capital floors

2018 Regulationin consultation

Introduction of capital floors based on revised standardised RWAs

Initial consultation undertaken and recalibration required

Under discussions with BCBS, regulators and industry

XIII

87

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